People's Rights Organization v. Bethlehem Associates, Civ. A. No. 72-2427.

• Decision Date: 23 March 1973
• Docket Number: Civ. A. No. 72-2427.
• Citation: 356 F. Supp. 407
• Parties: PEOPLE'S RIGHTS ORGANIZATION, an unincorporated association, et al. v. BETHLEHEM ASSOCIATES et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

356 F. Supp. 407

PEOPLE'S RIGHTS ORGANIZATION, an unincorporated association, et al. v. BETHLEHEM ASSOCIATES et al.

Civ. A. No. 72-2427.

United States District Court, E. D. Pennsylvania.

March 23, 1973.

Harry Newman, Bethlehem, Pa., for plaintiffs.

Michael Hepps, Asst. U. S. Atty., Neil Epstein, M. B. Oasin, Philadelphia, Pa., for defendants.

MEMORANDUM AND ORDER

TROUTMAN, District Judge.

The individual plaintiffs in this action are tenants of Bethlehem Townhouse Apartments, which are owned by defendant, Bethlehem Associates. People's Rights Organization is an unincorporated association of the tenants of the Bethlehem Townhouse Apartments. The apartments were financed under mortgages insured by defendant, Federal Housing Authority FHA pursuant to Section 236 of the National Housing Act, 12 U.S.C. § 1715z-1 and continue to receive subsidies under the Act.

On September 12, 1972, defendant Bethlehem Associates applied to defendant Department of Housing and Urban Development HUD for permission to increase the rent for their apartments. HUD approved the increase in basic rental charges in October of 1972, and these increases were implemented upon the expiration of the current leases. Neither HUD nor Bethlehem Associates afforded the tenants notice of the application or an opportunity to present their objections prior to its approval. Plaintiffs allege that the rental increase will create an unbearable hardship on them and may force them to vacate their apartments.

Plaintiffs have filed this action, seeking injunctive relief, compelling rescission of the HUD approval of the rental increase and compelling defendants to grant plaintiffs a full and fair hearing prior to the approval of any application for rent increases. In addition, plaintiffs seek damages in the amount of the increased rent collected and a judgment declaring that defendants' actions violated the National Housing Act, 12 U.S.C. § 1701 et seq. and the regulations promulgated thereunder, the Administrative Procedure Act, and the Due Process Clause of the Fifth Amendment. Jurisdiction is predicated on the Fifth Amendment, 12 U.S.C. § 1701 et seq., 28 U.S.C. § 1331, 5 U.S.C. § 701, and 28 U. S.C. § 1361. Before the Court are defendants' motions to dismiss the complaint for lack of jurisdiction and for failure to state a claim upon which relief can be granted.

I. Section 236

Section 236 was added to the National Housing Act in 1968 to encourage private enterprise to engage in the construction and development of decent housing for lower income families. In addition to mortgage insurance, Section 236 provides for assistance in the form of periodic subsidy payments to the housing mortgagee in order to reduce the mortgagor's interest costs. 12 U.S. C. § 1715z-1(b). The interest reduction formula is based upon the difference in costs required for principal, interest and mortgage insurance premium, as compared to that required for principal and interest on a mortgage bearing an interest rate of one per cent. 12 U.S.C. § 1715z-1(c). The interest subsidy, in turn, makes possible lower rental payments by the occupants of the housing development, thus fulfilling the purpose of the Act. This subsidy reduces rentals to a basic charge, and the tenant will pay either the basic charge, or such greater amount as represents twenty-five per cent of his income, but not in excess of the charges which would be necessary without interest reduction payments. 12 U.S.C. § 1715z-1(f).

To administer this program, the statute confers a broad discretion on the Secretary of HUD and provides in pertinent part:

"(e) As a condition for receiving the benefits of interest reduction payments, the project owner shall operate the project in accordance with such requirements with respect to tenant eligibility and rents as the Secretary may prescribe. Procedures shall be adopted by the Secretary for review of tenant incomes at intervals of two years (or at shorter intervals where the Secretary deems it desirable)." 12 U.S.C. § 1715z-1(e).

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"(h) In addition to establishing the requirement specified in subsection (e) of this section, the Secretary is authorized to make such rules and regulations, to enter into such agreements, and to adopt such procedures as he may deem necessary or desirable to carry out the provisions of this section."

The FHA has promulgated regulations for the implementation of the Section 236 program, 24 C.F.R. § 236.1 et seq., and such regulations provide that the Commissioner may regulate the mortgagor throughout the life of the mortgagor through a regulatory agreement or such other means as the Commissioner approves. 24 C.F.R. § 236.1; 24 C.F.R. § 221.529. The applicable standards for rental charges are set forth in 24 C.F.R. § 236.55. Pursuant to these regulations, Bethlehem Associates and the FHA entered into a regulatory agreement which provides as follows:

"4. The Owners covenant and agree that:

(a) With the prior approval of the Commissioner, they will establish for each dwelling unit (1) the basic rental charge determined on the basis of operating the project with payments of principal and interest under a mortgage bearing interest at one per cent and (2) a fair market rental charge determined on the basis of operating the project with payments of principal, interest and mortgage insurance premiums due under the insured mortgage on the project;

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(1) no change will be made in the basic rental or fair market rental unless approved by the Commissioner."

Under these FHA regulations and the regulatory agreement, Bethlehem Associates sought and obtained approval for the rental increase in question.

II. Jurisdiction

A. The Fifth Amendment

Plaintiffs initially argue that jurisdiction is conferred upon this Court by the Fifth Amendment. The District Courts of the United States are not, however, courts of general jurisdiction, but have only such limited jurisdiction as Congress has conferred upon them by statute. See United States ex rel. Gittlemacker v. County of Philadelphia, 413 F.2d 84, 88 (3d Cir. 1969). Thus, the Fifth Amendment absent any statute conferring jurisdiction cannot serve as an independent basis of jurisdiction in this Court.

B. The National Housing Act

Plaintiffs secondly allege that jurisdiction is conferred by the National Housing Act, 12 U.S.C. § 1701 et seq. The National Housing Act, under which this housing project was constructed and the mortgage thereon insured, confers neither a civil remedy nor jurisdiction. Potrero Hill Community Action Committee v. Housing Authority, 410 F.2d 974, 976 (9th Cir. 1969). Plaintiffs must accordingly show jurisdiction under Title 28 of the United States Code.

C. 28 U.S.C. § 1331

Plaintiffs allege that this Court has jurisdiction under 28 U.S.C. § 1331 in that substantial federal questions arising under the due process clause of the Fifth Amendment and the National Housing Act have been pleaded, and the amount in controversy exceeds $10,000. Since this action has been filed as a class action, plaintiffs claim that the amount in controversy requirement is satisfied by the aggregation of the claims of each member of the class. It is manifest that no single member of the class has a claim in excess of $10,000. Guidelines to determine whether it is proper to aggregate the claims of individual members of a class have been set forth in Snyder v. Harris, 394 U.S. 332, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969). There, the Supreme Court specifically held that aggregation of claims in a class action was to be permitted,

"only (1) in cases in which a single plaintiff seeks to aggregate two or more of his own claims against a single defendant and (2) in cases in which two or more plaintiffs unite to enforce a single title or right in which they have a common and undivided interest." 394 U.S. at 335, 89 S.Ct. at 1056.

In Potrero Hill Community Action Committee v. Housing Authority, supra, the Court of Appeals considered the question whether a tenant in a federally assisted low income project has a "single right" shared with other tenants similarly situated as to which all have a "common and undivided interest". The Court refused to permit the aggregation of the claims of the class on the ground that the tenants' rights arose only from the status of each individual lessee of a portion of the project premises and, therefore, no "single right" in which all tenants have a "common and undivided interest" was shown. See also Mattingly v. Elias, 325 F.Supp. 1374, 1380-1382 (E.D.Pa.1971). Thus, since no one claim reaches the minimum jurisdictional amount, jurisdiction in this action cannot rest upon 28 U.S.C. § 1331.

D. The Administrative Procedure Act

Fourthly, plaintiffs allege that they are persons "affected or aggrieved by agency action" within the meaning of 5 U.S.C. § 702 and, therefore, are entitled to judicial review. Initially, the Court of Appeals has held that the Administrative Procedure Act APA is a remedial statute and may not serve as an independent basis of jurisdiction to review agency action according to its terms absent any other basis for jurisdiction. Zimmerman v. United States, 422 F.2d 326, 330-331 (3rd Cir. 1970), cert. denied 399 U.S. 911, 90 S.Ct. 2200, 26 L.Ed.2d 565 (1970), rehearing denied 400 U.S. 855, 91 S.Ct. 26, 27 L.Ed.2d 93 (1970). Moreover, in Hahn v. Gottlieb, 430 F.2d 1243 (1st Cir. 1970) and in Langevin v. Chenango Court, Inc., 447 F.2d 296 (2d Cir. 1971), the question was raised whether the District Court had jurisdiction under the APA to review an FHA approval of a rent increase for a low and moderate income housing project which was federally assisted under Section 221 of the National Housing Act, 12 U.S.C. § 1715l(d). In holding that FHA decisions to grant a rent increase are "agency action . . . committed to agency discretion by law", thereby precluding judicial review under the APA, 5 U.S.C. § 701(a)(2), the Hahn Court concluded:

"In sum, it seems to

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